Nearly half of Americans say that they definitely or probably couldnt come up with $2,000 in 30 days, according to new research, raising concerns about the financial fragility of many households.

In a paper published by the National Bureau of Economic Research, Annamaria Lusardi of the George Washington School of Business, Daniel J. Schneider of Princeton University and Peter Tufano of Harvard Business School used data from the 2009 TNS Global Economic Crisis survey to document widespread financial weakness in the U.S. and other countries.

The survey asked a simple question, If you were to face a $2,000 unexpected expense in the next month, how would you get the funds you need? In the U.S., 24.9% of respondents reported being certainly able, 25.1% probably able, 22.2% probably unable and 27.9% certainly unable. The $2,000 figure reflects the order of magnitude of the cost of an unanticipated major car repair, a large copayment on a medical expense, legal expenses, or a home repair, the authors write. On a more concrete basis, the authors cite $2,000 as the cost of an auto transmission replacement and research that reported low-income families claim to need about $1500 in savings for emergencies.

Financial fragility isnt limited to low-income groups. Households with socioeconomic markers of vulnerability (income, wealth, wealth losses, education, women, families with children) are more likely to be financially fragile, and substantially more so, the authors write. The more surprising finding is that a material fraction of seemingly middle class Americans also judge themselves to be financially fragile, reflecting either a substantially weaker financial position than one would expect, or a very high level of anxiety or pessimism. Both are important in terms of behavior and for public policy.

Anecdotal evidence is that some who appear to be in gangs, or are “baby mamas”, have nice cars and wear “bling”. These sorts of people may not have a lot of cash for unexpected expenses, but seem to spend what they do have to buy whatever they want.

If you were to face a $2,000 unexpected expense in the next month, how would you get the funds you need?

Yieks!!! That is so frightening. We really need to do something or folks are going to be in the streets during retirement time. Some of these folks are educated and relatively successful folks who would have this problem. Businesses need to go back to the pension program. Yes it might cost more but we are going to pay for these folks one way or another. Pensions were the best thing for America and now they are practically gone. When pensions were around, people used to work at one company for 50 years.....there is no loyalty anymore at all.

Perhaps I misinterpreted this, but it sounds to me like they are talking about coming up with $2,000 from current/new income. It looks like, if you have to take the $2,000 from savings, you are in the fragile group, which would seem to make this a very stupid study with unsupportable conclusions. ?? Maybe I did not understand.

It is a little unclear, but the article seems to say that if you have to pawn your possessions or take out a payday loan to come up with the $2K, rather than dip into savings or ask friends and family, then you’re classified among the “fragile.”

22
posted on 05/25/2011 12:06:32 PM PDT
by rightwingintelligentsia
(Be careful of believing something just because you want it to be true.)

Meanwhile, Lusardi, Schneider and Tufano also looked at how different countries compare. They consulted with local partners to set the number used in local currency at a comparable level. Perceived capacity to cope with an emergency is lowest in the U.S., U.K. and Germany, all countries in which 50% of households or more would probably or certainly be unable to come up with the emergency funds, the authors wrote. France and Portugal occupy an intermediate position; 46% of respondents in Portugal would certainly or probably be unable to come up with the funds as would 37% of those in France. The highest levels of coping capacity are found in Canada (28% certainly or probably unable), Netherlands (27.9%), and Italy (20%).

I'd find it shocking if Italy turns out to be the paragon of G7 personal financial prudence. I wonder about the survey methodology.

23
posted on 05/25/2011 12:07:03 PM PDT
by Sooth2222
("Suppose you were an idiot. And suppose you were a member of congress. But I repeat myself." M.Twain)

If you were to face a $2,000 unexpected expense in the next month, how would you get the funds you need? In the U.S., 24.9% of respondents reported being certainly able, 25.1% probably able, 22.2% probably unable and 27.9% certainly unable.

And yet - they seem to be able to come up with the money for their iPhone and cigarettes...

25
posted on 05/25/2011 12:08:34 PM PDT
by 2banana
(My common ground with terrorists - they want to die for islam and we want to kill them)

MORE PEOPLE HAVE NO SAVINGS AT ALL: An increased percentage of workers report they have virtually no savings and investments. Among RCS workers providing this type of information, 27 percent say they have less than $1,000 in savings (up from 20 percent in 2009). In total, more than half of workers (54 percent) report that the total value of their households savings and investments, excluding the value of their primary home and any defined benefit plans, is less than $25,000

I’m not surprised at all by these results. Call it insight into the 50% of Americans that pay no Federal income taxes.

Also, being financially irresponsible is not confined to just that lower 50%. A lot of people live month to month with no financial planning and no savings. I’ve known people who have $25,000 - $30,000 on credit cards and spend every penny of their paycheck. They pay their expenses first and then blow ALL of the rest. If something comes up like auto repair or an emergency, the cost goes on the credit card. They pay whatever they want to on the cards with no real plan or expectation of paying off the balance. A lot of their money goes to credit card interest.

Just insane. I am talking career professionals here, not burger flippers. They are financially oblivious.

39
posted on 05/25/2011 12:36:03 PM PDT
by Freedom_Is_Not_Free
(Josh Ferrin for President - he is my new hero.)

RE:”The survey asked a simple question,  If you were to face a $2,000 unexpected expense in the next month, how would you get the funds you need? In the U.S., 24.9% of respondents reported being certainly able, 25.1% probably able, 22.2% probably unable and 27.9% certainly unable. The $2,000 figure reflects the order of magnitude of the cost of an unanticipated major car repair, a large copayment on a medical expense, legal expenses, or a home repair, the authors write. On a more concrete basis, the authors cite $2,000 as the cost of an auto transmission replacement and research that reported low-income families claim to need about $1500 in savings for emergencies.”

Are these the folks Ryan thought would support medicare privatization/reform? Ryan thinks these people would rather have more ‘choices’ than their medical bills paid by the government? I think they know what would happen to them at retirement in that case.

I remember in 2009 I posted a few comments that said that many Americans would rather deal with government 'death panels' than have to pay their own medical bills, many replied "NOOOOO, everyone wants freedom just like me" LOL.

I'm not surprised if a lot of Americans are financial morons. I'm surprised that it's half. My own estimate would be the historical share of the vote that goes to Democrats -- not quite half. If it's half or above -- it's all over for this country.

I might need to retire to Italy.

44
posted on 05/25/2011 12:42:44 PM PDT
by Sooth2222
("Suppose you were an idiot. And suppose you were a member of congress. But I repeat myself." M.Twain)

I wonder how many of these people who can’t come up with $2,000 have a large flat screen at home? A cell phone in their pocket? Enjoy their $6.00 Starbucks every day? Play the lottery? Have plenty of cold beer in the fridge?

And on and on....

Look. We make choices in life. Some people make the choice to live broke.

Are they stupid? After all, THEY have Uncle Obama as their sugar daddy.

The responses don’t even match up with the question!
-
If you were to face a $2,000 unexpected expense in the next month,
how would you get the funds you need?
In the U.S.,
24.9% of respondents reported being certainly able,
25.1% probably able,
22.2% probably unable
and 27.9% certainly unable
-

49
posted on 05/25/2011 12:47:32 PM PDT
by Repeal The 17th
(Proud to be a (small) monthly donor.)

People see the Ryan Medicare deal for what it is, attacking a benefit instead of cutting the size of government. It is past time for congress to put up are shut up . Cut the size of government first, has Ryan offered to cut any department of the government, will he ever??

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